Macro

China to expand electricity pricing reform

China will expand its pilot power transmission and distribution pricing reform to 12 more provincial power grids and one regional network in a bid to further open the electricity market, the country's top economic planner said on March 14.

Power grids in regions such as Beijing, Tianjin, Chongqing and Guangdong will be included in the pilot program, according to the National Development and Reform Commission.

The reform, first rolled out in Shenzhen in 2014, is mainly aimed at separating the power transmission and distribution price from the sales price, in effect allowing room for the market to have a bigger say in deciding the final price.

Unlike power-generating companies and sales firms, which face abundant competition in the market and thus have little pricing power, power grid companies are considered natural monopolies that can determine prices.

Under the reform, power grid companies will no longer profit from the difference between its costs and its sales prices. Instead, they will charge a government-verified service fee based on the costs of transmitting and distributing power.

By establishing an independent power transmission and distribution pricing mechanism, the government has laid a solid foundation for the market to decide prices on both the power generation and sales sides.

After its debut in Shenzhen, the reform was launched in Inner Mongolia, Anhui, Hubei, Ningxia, Yunnan and Guizhou in 2015.

Lula likely to take cabinet position: source

Brazil's former president Luiz Inacio Lula da Silva will likely accept a position in President Dilma Rousseff's cabinet but plans to travel to Brasilia on Tuesday to discuss his options with her in person, a source said on Monday.

Brazil's top three papers also reported late on Monday that Lula was expected to accept a ministerial position in the coming days, after a crusading federal judge was given jurisdiction to rule over money laundering charges presented against him.

Any decision to arrest Lula would now be made by Federal Judge Sergio Moro, who oversees a sweeping investigation into kickbacks at state-run oil firm Petrobras and approved the detention of dozens of senior executives.

State prosecutors filed for the arrest of Lula last week after charging him with money laundering for concealing ownership of a beachfront condo, in a case that had been separate from the investigation overseen by Moro in the southern city of Curitiba.

Accepting a cabinet position would give Lula immunity from Moro, though not from Brazil's Supreme Court. The source said Lula, Rousseff's predecessor and political mentor, was nearly convinced he should take the position.

It was not yet decided whether he should be Rousseff's chief of staff or replace the minister in charge of legislative affairs, Ricardo Berzoini, the source said.

Sao Paulo Judge Maria Priscilla Oliveira said in a decision on Monday the state prosecutors' case had an "undeniable connection" to the Petrobras investigation, in which dozens of engineering executives schemed to siphon money from Petrobras in order to bribe public officials.

News magazine Veja also reported a major break in the Petrobras case on Monday, providing details of alleged plea bargain testimony from the former head of engineering conglomerate Andrade Gutierrez that named several sitting ministers.

Veja reported, without saying how it obtained the information, that former Chief Executive Otavio Azevedo confessed that a bribery scheme already documented at Petrobras was standard operating practice for spending throughout the government.

Azevedo, who is now under house arrest, said the graft scheme included payoffs for soccer stadiums built for the 2014 World Cup, Veja reported, backing up similar reports from newspaper Folha de S.Paulo in November.

Media representatives for Andrade Gutierrez declined to comment immediately on the report. Efforts to reach representatives of Azevedo were not immediately successful.

His plea bargain, if confirmed, would be the first from a head of Brazil's biggest engineering groups, which have been at the center of the Petrobras investigation rattling the country's political establishment for two years.

Moro has already allowed federal police to detain Lula for questioning after prosecutors said he may have benefited from the scheme, an event that spurred isolated clashes between Lula's supporters and critics.

Lula has disavowed ownership of the apartment and denied any wrongdoing, calling the investigation political in nature.

His lawyer condemned the decision to send the case to Curitiba, saying Moro should not have jurisdiction over the case and denying that Lula had anything to do with the Petrobras scheme. A spokeswoman for his institute said Lula taking a cabinet position was only speculation for now.

Moro, who has also jailed the former treasurer of Rousseff and Lula's Workers' Party as well as Lula's former chief of staff, has become a folk hero to millions of Brazilians fed up with impunity for the elite. Some have criticized his frequent use of pretrial detention, however.

The investigation of Lula has bolstered calls for Rousseff to step down or be impeached. Hundreds of thousands of anti-government protesters flooded the streets on Sunday, many carrying signs in support of judge Moro.

Rousseff also appointed a new justice minister on Monday for the second time in a month, naming Eugenio Jose Guilherme de Aragao, a prosecutor who had previously worked for the nation's electoral court.

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Distressed asset buyers see silver lining as miners languish

After years on the sidelines, funds specializing in troubled assets are set to take center stage in the mining industry, driving deals in a sector where the top players alone plan to raise more than $30 billion through sales to cut debt.

Overall deal volume in mining and metals last year sank to its lowest level globally since 2003, according to Thomson Reuters data, as the industry's sellers, crippled by more than $1 trillion in debt, crowded a market with very few buyers.

Bankers, funds and investors, however, say that could change in 2016, as specialist buyers rethink a market where prices are languishing, mines are losing money and the traditional competition is weak.

Funds sidelined and waiting for the right deals could amount to as much as $3 billion, according to a ballpark figure from corporate finance and restructuring firm FTI Consulting.

"The longer this commodity rout continues, the greater number of restructures," David McCarthy, national leader for restructuring at Deloitte in Sydney, told Reuters.

"Some of those will be by existing financiers and existing equity holders. For others, the risk will be too great - and that's where distressed opportunities will (be)."

Oaktree Capital, the world's largest investor in distressed debt, opened an office in Sydney this month, in part at least because of the strain in mining, it said, particularly iron ore, where it sees potential for deals.

Others are targeting existing mines where the geology has already been proven - and not development projects - for gold, copper, zinc and rare minerals, all exposed to the later stages of the economic cycle and renewable energy.

"I think it will be a busy year for everyone in the industry," said Michael Ryan, a senior managing director of FTI Consulting in Perth.

"I expect to see a lot of restructuring and cost cutting work, debt for equity transactions, restructuring balance sheet type transactions, sales of assets, divestiture of non-key assets to further shore up (distressed miners') balance sheets."

In Australia's struggling iron ore sector for example, existing lenders to Atlas Iron (AGO.AX) agreed to take a haircut on repayments in return for a larger equity stake.

But steel and iron ore group Arrium (ARI.AX), with nearly $2 billion of debt, had to look outside for help, turning to GSO Capital Partners, the global credit and alternative investment arm of PE behemoth Blackstone Group (BX.N).

Earlier this month, it secured $927 million in funding to help Arrium retire debt and overhaul its business.

Media reports have said Cerberus Capital Management, another major U.S. investor in distressed assets, also considered a move on Arrium and remains on the sidelines. Cerberus did not respond to an emailed request for comment.

In November, global PE group Denham Capital backed Perth-based Auctus Minerals and its management team of mining restructure specialists with $130 million, as it bought battered Atherton Resources ATE.AX, which holds zinc and gold-copper resources in Queensland.

"If you invest equity into what makes money at current price levels, you also have the unlimited upside if, during the holding period, the market recovers," Denham Capital Managing Director Bert Koth told Reuters.

But the key question is how long these new financial investors can hold on to mining assets, given futures prices that suggest metals prices could languish for as long as another decade - the very cycles that have long kept private equity out of mining.

More wretched news in the world's 7th largest economy

Data released on Monday showed that economic activity in the world's 7th largest economy fell 8% this January from a year before. That makes it the 11th month in a row that activity has fallen.

This is going to be a difficult problem to solve, since Brazil's government is a complete mess right now.

Millions of Brazilians took to the streets over the weekend, peacefully protesting corruption that has reached the highest levels of the country's government. It all stems from a 2014 corruption sting called Operation Car Wash, that showed the ruling party was engaged in widespread corruption at Petrobras, the country's massive quasi-state oil company.

ReutersDemonstrators attend a protest against Brazil's President Dilma Rousseff, part of nationwide protests calling for her impeachment, at Copacabana beach in Rio de Janeiro, Brazil, March 13, 2016.

Last week, beloved former President Luiz Inacio Lula da Silva was taken into custody and questioned about ill-gotten gains connected to the scandal. Over the weekend, protestors called for Lula's successor, Dilma Rousseff, to resign. She also faces impeachment proceedings in the country's legislature.

Analysts expect Brazil's economy to contract by 3.5% in 2016, but the estimates keep rolling in, and they keep going lower.

Shenhua Ningxia coal-to-oil project may face loss after operation

China’s coal giant Shanhua’s 4-million-tonne coal-to-oil project may face a deficit when it goes into operation in 2017 as planned, given the current low oil price.

The 55-billion-yuan ($8.5-billion) project, located in northwestern Ningxia, is one of the world’s largest chemical projects based on one-time investment scale.

The project kicked off construction in September 2013, and will produce 4.05 million tonnes of oil products and consume 24.61 million tonnes of coal per year, respectively.

However, the project has become unprofitable, as the international crude oil price has dropped below $40 per barrel, lower than the break-even point of $55 per barrel for coal-to-oil products.

Ningxia’s parliamentary delegates have recently submitted a proposal to cut or exempt consumption tax for the project during the ongoing two sessions. Experts considered it unlikely for the government to adjust tax for just one project. Moreover, the tax cut will not save the project.

Total investment into the project has reached 31.6 billion yuan by end-2015, the parliamentary delegates said.

Brazil's Rousseff benefited from Belo Monte dam graft: report

Graft money skimmed from overpriced contracts to build the Belo Monte hydroelectric dam in the Amazon funded President Dilma Rousseff's 2010 and 2014 election campaigns, a ruling Workers' Party senator has testified according to newsweekly IstoE.

If confirmed and accepted as legal evidence, the testimony of Senator Delcidio do Amaral will deepen a political crisis that threatens to topple Rousseff, whose opponents are seeking to impeach her or annul her re-election due to corruption.

In plea bargain statements to prosecutors, Amaral said a graft scheme mounted during the government of Rousseff's predecessor, Luiz Inacio Lula da Silva, funneled 45 million reais (12.5 million) from Belo Monte contracts into the campaign coffers of the ruling Workers' Party and its ticket partner, the Brazilian Democratic Movement Party (PMDB), IstoE reported.

A spokesman for Lula declined to comment on the report. Calls to Rousseff's office were not returned while Amaral's spokesman said the senator would not comment of the magazine report.

Lula was charged this week with money laundering by Sao Paulo state prosecutors in connection with the massive bribery and kickback scandal surrounding state-run oil company Petrobras that has led to the jailing of executives from top engineering firms, such as Odebrecht, Andrade Gutierrez and OAS, companies that have the biggest stakes in the consortium building Belo Monte.

Brazil prosecutors seek $2 bln from Odebrecht, Petrobras executives

Brazilian prosecutors late on Saturday accused executives from construction conglomerate Odebrecht and state-run oil company Petrobras of misconduct and demanded they pay 7.3 billion reais ($2 billion) in damages.

Prosecutors accused Odebrecht of paying bribes to win multibillion-dollar contracts with Petrobras as part of a corruption scheme that implicated dozens of politicians and top executives.

Odebrecht is currently under investigation for its involvement in the graft and influence-peddling scandal at Petrobras known as "Operation Car Wash." Family member Marcelo Bahia Odebrecht, who ran the company from 2008 until recent months, was sentenced on Tuesday to about 19 years in prison in connection with the scandal.

In a written statement, the prosecutors of the task force investigating the scheme said they had evidence that Odebrecht paid bribes to win contracts at the oil refineries Getulio Vargas and Abreu e Lima as well in a Rio de Janeiro petrochemical plant and the Gasduc gas pipeline.

Odebrecht said in a statement it was surprised by the accusations, saying the compensation values were "inconsistent."

"Any hypothetical requirement arising from the case depends on due process, with decisions of all competent courts" said the statement, adding Odebrecht's construction arm, Construtora Norberto Odebrecht, would respond to the accusations.

The scandal has undercut Odebrecht's access to financing, and the group, which has more than a dozen business units, is seeking to ease a swelling debt burden.

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A bevy of bubbles

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Bull or Bear?

Google and Ti Vo attack the set top box.

The Federal Communications Commission held an initial vote last month on the rules,meant to give consumers more choice in accessing pay-TV content. Viewers typically use a set-top box rented from their cable or satellite provider or log in via that company’s app on another device. Under the proposed rules, they would be able to view content using devices, apps or software made by others, including Alphabet’s Google or TiVo.

Pay-TV providers are staunchly opposed. Clearly, roughly $20 billion a year in rental fees are an issue. The bigger concern is it would distance them from customers and put viewing data into the hands of companies like Google, which see TV advertising as the next frontier.

BoE backs a state sponsored bitcoin?

Computer scientists have devised a digital crypto-currency in league with the Bank of England that could pose a devastating threat to large tranches of the financial industry, and profoundly change the management of monetary policy.

The proto-currency known as RSCoin has vastly greater scope than Bitcoin, used for peer-to-peer transactions by libertarians across the world, and beyond the control of any political authority.

The purpose would be turned upside down. RSCoin would be a tool of state control, allowing the central bank to keep a tight grip on the money supply and respond to crises. It would erode the exorbitant privilege of commercial banks of creating money out of thin air under a fractional reserve financial system.

“Whoever reacts too slowly to these developments is going to take it on the chin. They will lose their businesses,” said Dr George Danezis, who is working on the design at University College London.

"My advice is that companies should play very close attention to what is happening, because this will not go away," he said. Layers of middlemen in payments systems face a creeping threat across the nexus of commerce, stockbroking, currency trading or derivatives. Many risk extinction over time.

“Deep in the markets there are dark pools buying and selling shares, and entities that facilitate that foreign exchange. There are Visa, Master, and PayPal. These are the sorts of guys that we are going to disrupt,” he said.

University College drafted the plan after being encouraged by the Bank of England last year to come up with a radical design for a secure digital currency. The Bank itself has an elite four-man unit grappling with the implications of crypto-currencies and blockchain technology.

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Gundlach calls rally over.

E Book sales contract?

The Bookseller magazine says that each of the five biggest general trade publishers in the UK – Penguin Random House, Hachette, HarperCollins, Pan Macmillan and Simon & Schuster – saw their ebook sales fall in 2015. At Penguin Random House, the UK’s largest trade publisher, ebook totals slipped by 0.4% in 2015, down from 16.17m to 16.1m. At Hachette, they were down 1.1% to 14.5m, while at HarperCollins, when sales from Harlequin Mills & Boon are excluded (the company was acquired halfway through 2014), ebook sales were down 4.7%. The slip at Pan Macmillan was 7.7%, and at Simon & Schuster it was 0.3%.

“For those who predicted the death of the physical book, and digital dominating the market by the end of this decade, the print and digital sales figures from the big five for 2015 might force a reassessment,” wrote the Bookseller’s features editor Tom Tivnan. “Sales have dropped. Or at the very least, we can without a shadow of a doubt say that ebook volume slid for the big five publishers for the first time since the digital age began.”

Oil and Gas

Anadarko raises $3bn.

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Cheap oil, new pipelines end rail transport boom, EIA says

Declining prices and extra pipeline capacity have shrunk U.S. crude by rail shipments, according to an analysis by the U.S. Energy Information Administration.

The majority of the slowdown has come thanks to slowing shipments of oil from Midwest producers to the refineries of the Gulf Coast. Shipments of crude oil to the East Coast and the Pacific region are down slightly, though still above 2012 levels.

Rail shipments peaked at 928,000 barrels per day in October 2014, the EIA said. Most of the oil flowed from the Midwest to the refineries on the coasts, as crude oil buyers looked to cash in on the U.S. oil that was selling for less than oil from overseas. Since then, the incentive to move oil has slipped as the difference between global and U.S. oil prices has narrowed, the EIA said.

“Because domestic crudes such as West Texas Intermediate (WTI) and Bakken, which are priced at Oklahoma and North Dakota, respectively, are no longer priced significantly less than waterborne crudes such as North Sea Brent, there is less of a cost advantage for costal refineries to run the domestic crudes,” analysts wrote.

More than half of the oil carried on rails starts in the Midwest and ends up in the East Coast, the EIA said. The figure peaked at 465,000 barrels per day in April 2015, and has declined as refineries have imported more oil. A smaller amount of rail cars head to the West Coast — shipments averaged 139,000 barrels per day of crude oil by rail from the Midwest in 2015, about the same as 2014.

Rail shipments from the Midwest to the Gulf Coast have plummeted from the largest share of the market in 2012 to the smallest in 2015. The shipments started to decline in late 2013 as new pipeline capacity offered producers a cheaper route to the regions refiners. Shipments dropped to 38,000 barrels per day in December 2015, down by 75,000 barrels per day from the previous year.

Near-Record Cash `Comfort' for Canada Oil Firms Amid Price Rout

Canada’s biggest oil producers are sitting on a near-record pile of cash, giving them the resources to keep investing and manage debt while weathering the worst price rout in a generation.

The five largest oil producers including Suncor Energy Inc. and Cenovus Energy Inc. have a combined C$8.5 billion ($6.4 billion) in cash and cash equivalents, an increase of 7.6 percent from a year earlier and more than twice the levels seen during 2009 downturn. The figures, which are little changed from a record C$9 billion in 2014, don’t include the proceeds from Imperial Oil Ltd.’s recentsale of its Esso-brand gas stations for C$2.8 billion.

“Sitting on cash and a healthy balance sheet has become a competitive advantage,” Amir Arif, an analyst at Cormark Securities Inc. in Calgary, said by phone. “These guys still have a lot of capital they need to spend.”

Divestitures, cost cutting, equity raises, and dividend cuts have helped bolster balance sheets as Canadian oil producers buckle down for the “lower for longer” prices Suncor Chief Executive Officer Steven Williams has described. Compared with the last downturn when commodity prices made a quick recovery, the industry isn’t betting on a return to high prices and needs the money to keep their operations expanding.

Having cash is an important survival tactic as commodity markets remain volatile despite the recent recovery that saw oil prices rebound toward $40 from more than a 12-year low of about $26 a barrel in February. West Texas Intermediate is expected to average C$39.50 this year, according to the estimates compiled by Bloomberg. The North American benchmark settled at $37.25 Monday on the New York Mercantile Exchange.

Nigeria's state oil company failed to remit $16.1 bln to public purse in 2014 - auditor-general

Nigeria's state oil company failed to remit 3.2 trillion naira ($16.1 billion) to the public purse in 2014, the auditor-general said on Monday.

Samuel Ukura, who presented his findings in a report to lawmakers at the national assembly, said other government ministries and agencies had failed to remit funds which took the total figure not passed on to 3.3 trillion naira for that year.

Development in Nigeria, Africa's biggest oil producer and largest economy, has been stunted by decades of corruption and mismanagement.

Debt deadlines loom for SandRidge, Venoco and Energy XXI

The first major upstream oil and gas bankruptcy filing of the year could occur this week as SandRidge Energy Inc, Venoco Inc and Energy XXI Ltd reach the end of grace periods following millions in missed interest payments.

The three oil and gas exploration and production companies with operations across the United States, said they would skip a total of $44.2 million in interest payments last month, as they negotiated debt restructurings with creditors.

Their decisions kicked off month-long grace periods. Under many credit agreements, lenders can call all their debt due after the end of the grace period, potentially pushing the companies into bankruptcy.

Venoco and Energy XXI could not immediately be reached for comment. SandRidge declined to comment on the grace period.

If either SandRidge or Energy XXI file for bankruptcy they would be among the biggest victims of the nearly two-year-long oil selloff, which has seen dozens of companies go under, tens of thousands of jobs axed and corporate spending slashed.

Before a rebound in the past two months, crude oil prices fell 75 percent from mid-2014 highs above $100 a barrel to 12-year lows of about $26 for WTI and around $27 for global benchmark Brent.

SandRidge currently has 717 employees, Energy XXI had 378 employees at June 30, and Venoco had 158 employees at the end of 2014.

SandRidge has total debts of around $4 billion and Energy XXI owes approximately $3.3 billion. Venoco owes $565 million.

One of the options SandRidge was considering when it announced it hired restructuring advisors earlier this year was a prepackaged bankruptcy. Energy XXI has said in filings it may file for bankruptcy if oil prices remain low.

More than 40 energy-related companies sought court protection from their creditors in 2015. The bankruptcies have been slow and tortuous. Assets have been sold at depressed prices.

Offshore driller Paragon Offshore Plc has been the only major energy-related bankruptcy filing this year, but roughly a third of U.S. oil producers, or 175 firms, is at risk of slipping into Chapter 11, according to a study by Deloitte, the auditing and consulting firm.

More than a dozen companies rated "B-" or below in the stressed energy sector must also come up with the cash to make interest payments March 15, according to data from Fitch Ratings.

The companies include Chesapeake Energy Corp, which has an approximately $400 million maturity due according to Thomson Reuters data. Others are Linn Energy LLC, which is already working with restructuring advisors and California Resources Corp. All three companies worked out debt swaps with investors last year to try to reduce their debt loads and interest expenses.

Goodrich Petroleum Corp has already said it will not make $12.2 million in interest payments due March 15, and $2.8 million in payments due April 1.

The company is offering equity to its holders of preferred stock and unsecured notes in an exchange offer that expires March 16. If the holders do not participate, Goodrich said it is likely to file for Chapter 11 bankruptcy, in which those holders will probably receive nothing.

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OPEC sees lower 2016 demand for its oil, pointing to higher surplus

OPEC on Monday predicted global demand for its crude oil will be less than previously thought in 2016 as supply from rivals proves more resilient to low prices, increasing the excess supply on the market this year.

The monthly report from the Organization of the Petroleum Exporting Countries contrasts with that of the International Energy Agency, which on Friday said producers outside OPEC were cutting production by more than it had expected.

Saudi Arabia in 2014 led a change in OPEC strategy to defend market share instead of cutting output to support prices, hoping to slow growth in rival supplies such as U.S. shale oil. The move accelerated a collapse in prices, which hit a 12-year low of $27.10 in January.

The price drop has started to slow the development of relatively expensive supply sources such as shale and forced companies to delay or cancel billions of dollars worth of projects, putting some future supplies at risk.

In the report, OPEC said it still expected supply from outside the group to fall by 700,000 bpd this year. But it revised up the absolute level of non-OPEC supply in 2015 and 2016, and said producer efforts to maintain output made its 2016 forecast more uncertain.

"There has been a reduction in production costs, mainly in the U.S., as well as increased hedging, with producers choosing to produce with losses rather than stopping production," OPEC said. "This has caused the non-OPEC supply forecast in 2016 to become more uncertain."

As a result, OPEC now expects the global demand for its crude to average 31.52 million bpd in 2016, down 90,000 bpd from last month's forecast.

The group pumped 32.28 million bpd in February, the report said citing secondary sources, down about 175,000 bpd from January, mainly due to outages in Iraq and Nigeria.

Saudi Arabia told OPEC it kept output in February steady at 10.22 million bpd, after the top oil exporter struck a preliminary deal with fellow OPEC members Venezuela and Qatar, plus non-OPEC Russia, to freeze output.

Iran, which wants to regain market share after the lifting of Western sanctions on Tehran rather than freeze output, told OPEC it raised supply to 3.39 million bpd - about 250,000 bpd more than the secondary sources' estimate.

The report indicates supply will exceed demand by about 760,000 bpd in 2016 if OPEC keeps pumping at February's rate, up from 720,000 bpd implied in the previous report.

OPEC on Monday predicted global demand for its crude oil will be less than previously thought in 2016 as supply from rivals proves more resilient to low prices, increasing the excess supply on the market this year.

The monthly report from the Organization of the Petroleum Exporting Countries contrasts with that of the International Energy Agency, which on Friday said producers outside OPEC were cutting production by more than it had expected.

Saudi Arabia in 2014 led a change in OPEC strategy to defend market share instead of cutting output to support prices, hoping to slow growth in rival supplies such as U.S. shale oil. The move accelerated a collapse in prices, which hit a 12-year low of $27.10 in January.

The price drop has started to slow the development of relatively expensive supply sources such as shale and forced companies to delay or cancel billions of dollars worth of projects, putting some future supplies at risk.

In the report, OPEC said it still expected supply from outside the group to fall by 700,000 bpd this year. But it revised up the absolute level of non-OPEC supply in 2015 and 2016, and said producer efforts to maintain output made its 2016 forecast more uncertain.

"There has been a reduction in production costs, mainly in the U.S., as well as increased hedging, with producers choosing to produce with losses rather than stopping production," OPEC said. "This has caused the non-OPEC supply forecast in 2016 to become more uncertain."

As a result, OPEC now expects the global demand for its crude to average 31.52 million bpd in 2016, down 90,000 bpd from last month's forecast.

The group pumped 32.28 million bpd in February, the report said citing secondary sources, down about 175,000 bpd from January, mainly due to outages in Iraq and Nigeria.

Saudi Arabia told OPEC it kept output in February steady at 10.22 million bpd, after the top oil exporter struck a preliminary deal with fellow OPEC members Venezuela and Qatar, plus non-OPEC Russia, to freeze output.

Iran, which wants to regain market share after the lifting of Western sanctions on Tehran rather than freeze output, told OPEC it raised supply to 3.39 million bpd - about 250,000 bpd more than the secondary sources' estimate.

The report indicates supply will exceed demand by about 760,000 bpd in 2016 if OPEC keeps pumping at February's rate, up from 720,000 bpd implied in the previous report.

"Major oil producers shall coordinate with each other. However, since Iran's production decreased under sanctions, we totally understand Iran's position to increase production and revive its share in the global markets," Shana quoted Alexander Novak as saying.

"Within the framework of major oil producers (OPEC and non-OPEC), Iran is liable to have an exclusive way for increasing its oil production," Shana quoted Novak as saying following a meeting with Iranian Petroleum Minister Bijan Zanganeh.

Top non-OPEC exporter Russia and OPEC's biggest producer Saudi Arabia agreed last month to freeze oil output levels if all other major producers agreed to join. Iran remains a major obstacle to the deal as it wants to boost production volumes to regain pre-sanctions output levels.

Turning to frack tech, stricken U.S. oil drillers test new limits

Top U.S. shale producers are pushing fracking technology to new extremes to get more oil out of their wells, as they weather lower-for-longer oil prices.

While the impact of the techniques may be scarcely noticeable on current U.S. output with so few wells in operation, it could mean drillers are able to accelerate production more fiercely than ever once prices recover.

The hunt for the next big technology to transform the process of fracking is still on, with companies looking at methods such as using carbon dioxide to coax more oil out of wells that have already been hydraulically fractured.

Commentary from executives in recent weeks suggests they are doubling down on existing accomplishments and innovations to boost production.

Pioneer Natural Resources is increasing the length of stages in its wells, Hess Corp is raising the total number of stages, EOG Resources is drilling in extremely tight windows, while Whiting Petroleum Corp and Devon Energy Corp have loaded up more sand in their wells, fourth-quarter earnings call comments show.

Sector experts say these techniques could boost initial output per well by between 5 and 50 percent, demonstrating the resilience of the industry. . "We have got to keep moving ahead in terms of our knowledge base so that when things improve we can hit it with all cylinders," Pioneer COO, Tim Dove, said on a recent quarterly results call.

The company plans to cut spacing between clusters, or small perforations that provide fluid and sand access to the formation, to as little as 15 feet - a move it said would have been "unheard of" in the past.

For a typical well in the Bakken, a jump to 15-foot spacing could easily boost initial output by as much as 50 percent, Monte Besler, who runs FRACN8R Consulting in North Dakota, estimated.

Many of the techniques have been around for the last four years as the U.S. shale boom took off, but drillers are deploying them at a greater rate as prices show little sign of recovering significantly amid concerns about a global glut.

"The increase in proppant amounts and fluid amounts and the decrease in cluster spacing, all of those are directions that industry in general has been headed," said Jennifer Miskimins, senior consulting engineer with Barree & Associates in Lakewood, Colorado.

"In some places it is helping with long-term recoveries and that's why we're starting to see people push the envelope a little bit."

Drillers have already idled slower rigs, shifted crews and high-speed rigs to "sweet spots" with the most oil during the punishing 20-month price rout.

With the major shale companies ready to crank up the spigots if oil prices recover to $40-$45 a barrel, the latest steps are all the more significant.

For many, efforts to boost production while keeping costs in check are already paying off.

In the fourth quarter, Pioneer slashed stage lengths by 60 percent, added one cluster per stage, and pumped more fluid - about 36 barrels per foot, up from 30 - in all of its wells.

The results? Initial production jumped by more than 15 percent from the prior quarter to 2,200 barrels per day in about 22 of its wells in the Permian, the company said, describing the result as "exceedingly strong."

A frack stage is a portion of the horizontal section of the well. Typically, the larger the number of stages used, the better initial production is expected to be.

Hess' decision to increase stage counts by about 40 percent to 50 delivered a more than 20-percent average increase in initial production rates for basically the same cost, the company said.

The costs for producers for these techniques is also dropping dramatically as service providers compete aggressively for the limited amount of work on offer, experts said.

Others are turning to sand, which is pumped with a mixture of chemicals and water to induce pressure and crack rocks.

Whiting, Devon and Continental Resources Inc have all loaded up well completions with higher proppant concentrations, or essentially, sand.

The benefit for a company like Devon, which is pumping about 2,500 to 2,700 pounds per lateral foot in some of its wells, could be as much as a 50 percent rise in initial rates, Besler estimated.

The moves highlight that these companies are not yet considering raising the white flag in the face of the downturn.

Rig count falls to new lows

The number of active rigs fell to the lowest level in at least 70 years this week, as cheap crude oil continued to drive companies from the oil patch.

The number of rigs chasing crude oil fell by six to a total of 386, oil service company Baker Hughes said Friday. Natural gas drillers idled three rigs, bringing the total rig count to 94. Combined, the rig count fell by nine to 480.

The previous lowest combined count was 488 rigs on April 23, 1999. The records begin in the early 1940’s.

The oil rig count is now down 76 percent from its October 2014 peak of 1,609.

The decline in the rig count has contributed to shrinking U.S. production and a recent rally in crude oil.

Iran set to join oil freeze talks after output at 4 mbpd: ISNA

Asked whether Russian Energy Minister Alexander Novak would try to convince Iran to join an oil output freeze during a visit this week, Zanganeh said Iran may join the freeze after its production reaches 4 million bpd.

"They should leave us alone as long as Iran's crude oil has not reached 4 million. We will accompany them afterwards," Zanganeh was quoted as saying.

Iran has rejected freezing its output at January levels, put by OPEC secondary sources at 2.93 million barrels per day, and wants to return to much higher pre-sanctions production.

It is working to regain market share, particularly in Europe, after the lifting of international sanctions in January. The sanctions had cut crude exports from a peak of 2.5 million bpd before 2011 to just over 1 million bpd in recent years.

Iran's oil exports are due to reach 2 million bpd in the Iranian month that ends on March 19, up from 1.75 million in the previous month, he said.

A meeting between oil producers to discuss a global pact on freezing production is unlikely to take place in Russia on March 20, sources familiar with the matter said last week, as OPEC member Iran is yet to say whether it would participate in such a deal.

Imperial Oil unveils plans for $2-billion Cold Lake oil sands project

Imperial Oil Ltd. has unveiled plans for a $2-billion oil sands project that it says will harness new technology to cut costs and lower carbon emissions, a sign that the industry’s biggest players are making plans to revive growth despite sputtering crude prices.

Imperial, which this week sold about 500 retail gas stations in a $2.8-billion deal, said on Friday that it has filed an application with the Alberta Energy Regulator for a new steam-driven oil sands plant located near its existing operations in Cold Lake, Alta.

The project would pump about 50,000 barrels of bitumen per day from the Grand Rapids area. Construction could start as early as 2019, with first oil in 2022, assuming timely regulatory approvals and “favourable” market conditions, the company said without elaborating.

Imperial, an affiliate of U.S. giant Exxon Mobil Corp., is seeking approvals for a new oil sands project as competitors retrench to cope with the sharp plunge in crude prices that has rendered new bitumen projects uneconomic.

It marks the first major commercial test for a technology touted by executives as a tool for curbing the industry’s emissions of planet-warming greenhouse gases, while at the same time lowering overall development costs.

The technique involves mixing solvents – butane, condensate and other petroleum liquids – with steam at well sites, lowering the amount of energy it takes to loosen underground seams of bitumen buried too deep to mine.

Imperial says it has piloted the technology at its Cold Lake operations since 2010. Its studies show a 25-per-cent reduction in carbon intensity compared to existing projects with no solvents, although some experts have questioned such claims. A similar reduction in water-use intensity is expected, the company said.

Imperial is also studying whether to use solvents at its proposed Aspen project, a steam-driven development estimated to cost as much as $7-billion. No decisions have been made to build that project, which could ultimately pump 135,000 barrels per day.

The company’s application for a new project could throw cold water on speculation that it is building a war chest for a big acquisition following the sale of its retail gas outlets, RBC Dominion Securities Inc. analyst Greg Pardy said in a note.

Oilfield services providers are cutting rates to less than cost, renting equipment for nothing and extending credit to customers who aren’t likely to pay to maintain market share, charged the president and chief executive of Total Energy Services Ltd. on Thursday.

“Price competition has been fierce, with some competitors literally offering certain of their equipment and services for free … we cannot and will not compete with free,” he said on a conference call to discuss fourth-quarter results.

“Our refusal to pursue unprofitable work and recklessly extend trade credit has undoubtedly had a negative impact on near-term equipment utilization and revenue.”

Total said its 18 rigs in Western Canada achieved only 15 per cent utilization in the last three months of 2014, down from 49 per cent in a fleet of 17 in the same period of 2014. Major equipment rentals fell to 17 per cent from 44 per cent and revenue from its compression and process services division fell 47 per cent to $36.5 million.

Analyst Dan MacDonald of RBC Dominion Securities said Total missed estimates for earnings adjusted for one-time items, posting EBITDA of $6.5 million, versus his prediction of $9.9 million and consensus of $9.5 million.

“Weaker than expected revenues in both rentals/transportation and compression/processing manufacturing were the driver, with consolidated margins coming in about 350 basis points below expectations on lower revenues, weaker pricing,” he wrote in a note to investors.

Total posted a net loss of $3 million versus a gain of $13 million in the fourth quarter of 2014, as revenue fell 57 per cent to $52 million. Its shares gained 33 cents to $13.33 on Thursday.

Halyk criticized companies who are cannibalizing equipment for spare parts, boasting that all of Total’s idle gear is ready to go back to work with little notice.

He said Total has reduced its workforce by 40 per cent in the past year without giving a number. In a regulatory filing last year, it said it employed 1,153 at the end of 2014 — 40 per cent would equate to about 460 people.

Total reported it reduced capacity in its compression business in 2015 by about 20 per cent, moving out of two leased facilities it is now trying to sublet.

Halyk said the company signed a significant deal recently to provide compression equipment to a client in Australia.

Total, which has no debt, confirmed it would continue to pay a dividend. Its $12-million 2016 capital budget includes $3.9 million to buy operating assets of a U.S. oilfield equipment rental company completed effective Jan. 1.

Last fall, the company cancelled a $108-million hostile takeover bid for Calgary-based Strad Energy Services Ltd. after the target adopted a poison pill defence.

Eni succeeds with first production test of Zohr field

Eni successfully performed the production test of Zohr 2X, first appraisal well of Zohr discovery, which is estimated in a deliverability of up to 250 MMScfd in production configuration.

San Donato Milanese (Mi), 10 March 2016 - Eni successfully performed the production test of Zohr 2X, first appraisal well of Zohr discovery, in the Shorouk block, offshore Egypt.

During the test, 120 m of the reservoir were opened to production. The well, constrained by surface facilities, delivered up to 44 million standard cubic feet of gas per day (MMscfd). The comprehensive set of data collected and analyzed have proved that the well has a great production capacity, which is estimated in a deliverability of up to 250 MMScfd in production configuration (about 46 thousand barrel of oil equivalent per day).

The programme envisages for 2016 the drill of further three wells. Besides, the onshore gas treatment plant construction works have already started and the bids for the offshore activities launched and nearly completed.

Eni, through IEOC, holds 100% stake of Shorouk license. Operations are being conducted by Petrobel, which is a joint venture between IEOC and the State partner Egyptian General Petroleum Corporation (EGPC).

Attached Files

Glencore taps into Iraqi Kurdistan with $300 mln oil deal

Glencore has paid Iraqi Kurdistan $300 million as an advance for oil as it seeks to compete with trading houses Vitol and Petraco for profitable business despite disruptions and political instability, industry sources said.

Glencore, which declined to comment, has made a prepayment in recent days to the government of Iraq's semi-autonomous region which will start allocating it crude from mid-year, the sources told Reuters on condition of anonymity.

Kurdistan began direct oil sales to world markets in mid-2015 as it said the central government in Baghdad had failed to respect a budget deal, depriving the Kurdistan Regional Government (KRG) of funds to pay state and army salaries as it seeks to defeat Islamic State militants.

Iraq says the KRG failed to respect a deal to transfer oil to Baghdad.

Vitol has been the dominant player in Kurdish oil in recent months, exporting as many as 12 cargoes in January, Petraco has had as many as seven, and Swiss-based Trafigura has taken one cargo a month.

Meanwhile, Glencore's oil trading division has come under increased pressure to generate more profit after a collapse in metal and coal prices wiped out profit at its mining division.

Relatively cheap Kurdish oil has become a favourite grade for European refiners over the past year, reaching plants from Israel and Croatia in the Mediterranean to Poland and Germany.

A plunge in oil prices over the past year has triggered a budget crisis in Iraqi Kurdistan and forced the region to slash spending despite rising crude sales, which are being exported via the Turkish port of Ceyhan.

The KRG borrowed as much as $3 billion from Turkey and trading houses guaranteed by oil exports although the debt repayments are going slower than expected due to lower oil prices.

The KRG said on Monday it had received $100 million in February from a new prepayment commitment, without saying where it came from.

Kurdistan has faced severe export disruptions over the past three weeks after Turkey shut a pipeline for security reasons as it carries out a military campaign against Kurdish militants in its southeastern region.

Attached Files

Poland's Azoty looks to buy more gas from Gazprom-supplied PGNiG

Poland's largest chemicals firm Grupa Azoty, which beat 2015 profit forecasts on Friday thanks to low gas prices, plans to buy more gas from its main supplier PGNiG.

State-run Azoty took advantage of gradual gas market liberalisation in Poland to buy gas from other sources, but is rethinking this now that PGNiG offers bonuses to big clients.

"The current situation at PGNiG and its units means that we could be buying more gas from PGNiG," Azoty deputy head Witold Szczypinski told a news conference following its results.

Azoty buys 60 percent of its gas directly from PGNiG, which imports most of its gas from Russia's Gazprom..

"After PGNiG started the bonus policy, we received gas at market prices at the end of 2015 comparable to the European competition," Szczypinski added.

A fall in the price of gas, which Azoty uses for production, helped it beat forecasts with a 2015 net profit of 609 million zlotys ($157 million) from 231 million zlotys a year earlier and above the 576 million zlotys analysts had expected.

The group said that gas prices will continue to have a positive impact and saw them at about 12.5 euro per megawatt-hour in the summer months compared to 12 euro currently.

Mariusz Bober, who was appointed Azoty's chief executive last month as part of a wider reshuffle in state-run companies, said it will maintain its dividend policy which envisages paying out 40 to 60 percent of its stand-alone profit.

Attached Files

Jordan Cove LNG exports- Denied!

An Oregon LNG export terminal and feeder pipeline proposed by a Calgary company has been rejected by the U.S. energy regulator because it failed to line up customers to demonstrate need.

In a decision released Friday afternoon, the Federal Energy Regulatory Commission (FERC) denied both Veresen Inc.’s plan to build a $5.3-billion natural gas export terminal at Jordan Cove, Ore., and its Pacific Connector joint proposal with Williams Partners LP to construct a pipeline that would supply it.

The rejection throws into question the future of a project that has waited almost three years for regulatory approval.

On its fourth-quarter conference call Thursday, Veresen executives said the company was working to find customers to buy the liquefied natural gas it would produce at Jordan Cove. The six-million-tonne-per-year project is designed to supercool Canadian and U.S.-sourced natural gas to a liquid state for export primarily to Asian markets.

Veresen president and CEO Don Althoff, in a news release late Friday, said it will request a rehearing of the decision while those negotiations continue.

“Clearly, we are extremely surprised and disappointed by the FERC decision,” Althoff said.

“The FERC appears to be concerned that we have not yet demonstrated sufficient commercial support for the projects. We will continue to advance negotiations with customers to address this concern.”

Analyst Steven Paget of Calgary’s FirstEnergy Capital said the FERC decision was “shocking” but perhaps should not have been given the regulator’s duty to ensure need before giving approval.

“It’s a huge surprise,” he said. “I thought approval was very likely.”

He said Veresen now will have to choose between finding a way to appeal the decision or walk away from the project.

FERC said it was reluctant to allow a project to proceed over landowner protest when it hasn’t demonstrated need.

“The commission’s issuance of a certificate would allow Pacific Connector to proceed with eminent domain proceedings in what we find to be the absence of a demonstrated need for the pipeline,” it stated in its decision.

It left the door open for the companies to try again, however.

“Our actions here are without prejudice to Jordan Cove and/or Pacific Connector submitting a new application to construct and/or operate LNG export facilities or natural gas transportation facilities should the companies show a market need for these services in the future.”

In February, Calgary-based AltaGas Ltd. announced it was shelving its Douglas Channel LNG plant proposed for the B.C. coast indefinitely because the company was unable to find customers in Asia for the natural gas.

On Thursday, Althoff said the collapse in oil and gas prices has reduced the cost of building new energy projects, potentially improving Veresen‘s returns on Jordan Cove.

“The current downturn in global energy markets has created an opportunity to optimize capital costs for the project,” Althoff said.

A worldwide glut of liquefied natural gas is meanwhile emerging, threatening the economics of export projects such as Jordan Cove being proposed along America’s coasts. As much as half of U.S. LNG export capacity is at risk of being shut in between 2017 and 2020, according to the research and consulting group Wood Mackenzie Ltd.

Veresen had proposed to build four “trains” at Jordan Cove that would have been capable of producing 6.8 million metric tons of liquefied natural gas a year. The 373-kilometre Pacific Connector gas pipeline proposed to supply the plant would have been owned by Veresen and Williams Partners.

Alternative Energy

Solar giant sets new direction for profits

Hebei-based JA Solar Holdings, one of the world's largest producers of solar energy products, is seeking to expand in emerging markets touched by China's Belt and Road Initiative.

The company plans to install solar panels in all cities and towns along the Belt and Road routes, said Jin Baofang, the president of JA Solar.

The move comes in the face of a competitive price war in the solar industry and declining profits in the United States and Europe brought by heavy import taxes as high as 165%.

"Installed solar capacity has suffered a decline in some traditional markets, such as the US,” said Jin on the sidelines of the ongoing two sessions.

"While China's Silk Road Economic Belt and 21st Century Maritime Silk Road, which aim to improve cooperation with countries in Asia, Europe and Africa, has provided huge opportunities for us.”

The Nasdaq-listed company built its first overseas manufacturing plant in Penang, Malaysia. A key factor that has pushed Chinese solar companies to invest in Malaysia is that solar panels made there do not invite heavy duties in the US and Europe, as those made in China do.

Located in Penang Bayan Lepas Industrial Park, the first production line has an annual capacity of 400 MW. JA Solar has now begun construction on the second phase of the factory.

The company also plans to focus on markets in India, West Asia and Southeast Asia, Jin said.

Toyota partners in making wind-power hydrogen for fuel cells

Toyota Motor Corp. is responding to the main criticism of fuel cell cars, that making the hydrogen for the fuel is not clean, with plans to help make the hydrogen using wind power.

Fuel cells are zero-emission, running on the power created when hydrogen combines with oxygen in the air to make water. But to have a totally clean supply chain, the hydrogen must also be cleanly made. Right now, most hydrogen is produced from fossil fuels.

In a project announced Monday, hydrogen from the wind-power plant Hama Wing in Yokohama, southwest of Tokyo, will be compressed and transported by truck to power fuel-cell forklifts at four sites in the area — a factory, a vegetable-and-fruit market and two warehouses.

The project is a partnership between Toyota and the cities of Yokohama and nearby Kawasaki, and the prefectural Kanagawa government.

Japanese electronics and energy company Toshiba Corp. and energy supplier Iwatani Corp. also are involved.

Why not just use the electricity produced by wind power for electric vehicles? Why bother making hydrogen?

Defending the project, Toyota Senior Managing Officer Shigeki Tomoyama stressed that it is easier to store hydrogen than electricity.

Clean hydrogen is the best fix for global warming and energy security, he said.

"A stable supply of CO2-free hydrogen is needed," he told reporters at a Yokohama hotel.

Toyota, which makes the Prius gas-electric hybrid, says electric vehicles are limited because of their cruise range.

Wind-powered hydrogen is expected to reduce carbon-dioxide emissions by at least 80 percent compared with using gas or grid electricity, according to the companies.

The hydrogen trucks, which were newly developed, serve as hydrogen fueling stations for the forklifts.

Japan hopes to become a leader in hydrogen power and plans to showcase its prowess during the 2020 Tokyo Olympics. Costs and ensuring an adequate hydrogen supply are obvious challenges.

Attached Files

Portable power with solar panels you can roll up

U.K company Renovagen is looking to harness the power of the sun - wherever it shines - with "rollable" solar arrays that can be rapidly deployed in a variety of locations.

The sun is an abundant source of clean energy, and our appetite for it seems to be growing: according to a recent report from GTM Research, the solar market in the U.S. is set to grow by 119 percent in 2016.

"We're the first company that's actually made an entire solar farm rollable," John Hingley, managing director of Renovagen, told CNBC's Sustainable Energy.

"We've made the entire solar array, so the support structure and all of the power cabling, embedded into a single solar mat," Hingley went on to add.

This design enables rapid deployment of the array, Hingley said.

"We can tow it out in two minutes… because it's all pre-wired, everything is permanently wired in, there's no electrical connections [that] need to be made once you get on site, so you won't need a solar engineer to set it up."

An 18 kilowatt system can be deployed from a trailer unit in around two minutes, while a larger system up to 300 kilowatts in size can be set up in under an hour from a shipping container.

Currently, the company is selling demonstration systems. "Right now we have no economies of scale, so the cost is quite high, anywhere between £50,000 and £110,000 ($71,805 and $143,610) per system," Hingley said.

"But as we get into serious manufacturing the cost will come down significantly, so we might expect that to come to 35-75,000 pounds, perhaps even by the end of this year." He added that there was the potential for further cost reduction in the future.

In terms of where the technology can be used, there are a range of options, with Hingley listing sectors such as agriculture, festivals, disaster relief, humanitarian response and the military.

China rapidly converting to green energy

World-leading installation of wind, solar power shows commitment to reduce coal and emissions

China is making great strides in its green-energy efforts, according to an environmental expert.

"China broke records last year in the installation of wind and solar power," said Manish Bapna, executive vice-president of the World Resources Institute. "Clean energy investment was over $110 billion, twice what the US invested."

The investments are part of China's commitment to phase out the use of coal for energy. Bapna spoke at a teleconference last week about China's 13th Five-Year Plan (2016-20) and how it will affect climate and energy.

"China has committed to a new kind of economic development. It sees a move from real dependence on heavy industry toward service and innovation, and particularly a more consumption-based economy," said Kate Gordon, vice-chairwoman of climate and sustainable urbanization at the Paulson Institute.

"China has already been taking a slew of actions to cut its use of coal, which is responsible for about 80 percent of its CO2 emissions and about 50 to 60 percent of its most damaging form (of air pollution), PM2.5," said Barbara Finamore, Asia director at the National Resources Defense Council.

Individual cities and provinces have decided to impose their own limits on carbon emissions.

"There are 20 provinces and 30 cities that have already set some sort of coal-cap targets," Finamore said. "And for some, that means an absolute cap on coal consumption; for some this means no more increase, and for many, they set coal-consumption-reduction targets."

Despite good news on the environmental front, China's economic focus on creating a "green manufacturing strategy" and a shift from growth driven by investment and exports to one driven by consumption has come with a price: job loss.

According to preliminary forecasts, the coal and steel sectors will see combined layoffs of 1.8 million. The central government will allocate 100 billion yuan ($15.4 billion) over two years to help the laid-off workers find new jobs, according to media reports.

China's draft 13th Five-Year Plan will be reviewed at the annual session of the national legislature, which opened on March 5. Experts are optimistic that China will continue to improve its environmental protection efforts through the legislative process.

"Expectations are fairly high about what might be contained, not only in the 13th Five-Year Plan, but perhaps as importantly, in the following sectorial plans. And I think we're quite keen to see whether this shift that we have started to see over the past several years takes on a more accelerated step change in the coming five years," Bapna said.

Attached Files

Zimbabwe looks to the sun as drought hits hydropower

Zimbabwe is pushing forward with plans to build four new solar power plants, amid a drought that has battered its ability to generate hydroelectricity.

Severe dry conditions - linked to the El Niño weather phenomenon bringing extreme weather around the world - are affecting big and small producers of hydropower alike.

Phillip Muwungani of Chipendeke village, 70 km southeast of Mutare city, said his community's vision of producing its own clean electricity using water is fading.

Drought has affected water levels in Chitora River which powers the Chipendeke micro hydro plant, making electricity generation erratic.

The plant, which supplies electricity to villagers, a school, a clinic and a business centre, was built under a sustainable energy initiative backed by the ZERO Regional Environment Organisation, the Zimbabwe Energy Council and international development groups.

Experts say the Kariba Dam on the border with Zambia, which provides almost 60 percent of Zimbabwe's power, could lose its ability to generate electricity in around six months' time unless water levels improve.

With an installed capacity of 750 megawatts (MW), Zimbabwe's Kariba power plant is now generating less than 285 MW.

The Zimbabwe Power Company says feasibility studies and engineering procurement are underway for three solar projects at Gwanda, Insukamini and Munyati.

Construction is expected to start this year, at a combined cost of $635 million. Each solar power plant will generate 100 MW.

The projects have been on the cards for some time now as part of government efforts to boost solar energy, but the tenders were cancelled in 2014 due to irregularities in the bidding process. The contracts were re-issued to new companies last year, as the current drought-induced power crisis jolted the government into action.

In October, the government signed a deal with Intratrek Zimbabwe to construct the Gwanda solar project in partnership with Chinese company CHINT Electrics, backed by a $202 million loan from the Export-Import Bank of China.

Tenders to build solar power plants at Munyati and Insukamini have also been awarded to Chinese firms.

Construction at a fourth solar power project in Marondera, about 70 km east of the capital Harare, will start in September. De Green Rhino Energy, a Zimbabwean joint venture set up by a London-based consultancy, will invest $400 million from German investors in the project, which will start selling electricity to the national grid from the end of 2017 if all goes to plan.

The Marondera solar project should be able to generate 150 MW when it reaches full capacity, but will start with an initial investment of $113 million to produce 50 MW, according to De Green Rhino Energy CEO Francis Gogwe.

Attached Files

Agriculture

Indian agribusiness firm to fund first phase of Karnalyte’s Saskatchewan potash project

India-listed agribusiness firm Gujarat State Fertilisers and Chemicals (GSFC) has agreed in principle to provide $700-million to finance construction of the first phase of project developer Karnalyte Resources’ 625 000 t/y Wynyard potash deposit, in Saskatchewan.

TSX-listed Karnalyte would also spin out secondary mineral assets and unexplored lands into one or more separate entities to achieve a fully financed structure to build its flagship potash mine. The strategic partnership between Karnalyte and GSFC provided Karnalyte with a significant competitive advantage in the marketplace, and was expected to provide GSFC with a secure supply of potash for many years to come.

“This ground-breaking deal structure demonstrates GSFC's long-term commitment and desire to secure supplies of key natural resources through investment structures that are aligned with the values of Canadian shareholders. I believe this financing will serve as a template for future investment by Indian companies in Canada and will strengthen relations between our two countries for years to come,” commented GSFC senior VP and CFO Vishvesh Nanavaty.

The agreement made provision for senior secured debt, subordinated unsecured debt and an equity infusion to be backstopped by GSFC. Karnalyte advised that this structure allowed for a 3:1 debt-to-equity ratio for the project financing. The equity component of the project financing was expected to be fulfilled 50% by way of the issuance of common shares by the company, and 50% through issuing unsecured subordinated debt, which was expected to limit the shareholder dilution.

The transaction comprised more than $500-million in debt over a 20-year term; a total equity requirement equal to one-third of the amount of the senior secured debt, with up to 50% to be raised through subordinated unsecured debt and the remainder to be raised through issuing shares, backstop guarantees by GSFC for any shortfalls of equity in the event that Karnalyte was unable to raise sufficient amounts through issuing shares, and backstop guarantees by GSFC in the event of project cost overruns.

As a condition to obtaining the project financing, GSFC was required to have and maintain at least a 51% voting interest in Karnalyte, while the senior secured debt was outstanding. To this end, Karnalyte would issue a non-dilutive ‘special voting share’ to a subsidiary of GSFC.

Completion of the proposed transaction was subject to finalising definitive documentation, approval by Karnalyte and GSFC's boards of directors, approval by Karnalyte's shareholders, and regulatory approvals, including the approval of the TSX.

In 2011 Karnalyte received a positive feasibility study prepared by Foster Wheeler Canada and Ercosplan for Karnalyte's plans to construct a solution mining facility at Wynyard, with the aim of producing a high-grade (97% purity) granular potash product. Karnalyte intended to construct the facility in three phases, with Phase 1 expected to produce about 625 000 t/y, increasing by 750 000 t/y with Phase 2, and totalling 2.13-million tonnes a year with the addition of Phase 3.

Previously in 2013, GSFC, one of India's largest fertiliser and industrial chemicals manufacturing companies, made a strategic investment in Karnalyte of about $44.7-million, resulting in GSFC holding a 19.98% ownership stake in Karnalyte. During this deal, Karnalyte and GSFC signed an offtake agreement providing for GSFC to buy about 350 000 t/y from Phase 1.

The offtake would start with commercial production from Phase 1, which would result in Karnalyte having secured sales for about 56% of its potash production from Phase 1 for about 20 years. The offtake agreement also provided GSFC with the option to increase its offtake by 250 000 t/y to 600 000 t/y from the date when Phase 2 started commercial production. The agreement also provides GSFC with the potential to increase its offtake by up to 400 000 t/y from Phase 3, for a total yearly volume of up to one-million tonnes a year.

Precious Metals

Doray profit surges as Andy Well shines

Gold miner Doray Minerals on Tuesday announced a 263% increase in net profit after tax for the six months to December, compared with the previous corresponding period, as both gold production and revenue increased.

Doray reported a net profit after tax of A$14.5-million, compared with the A$4-million reported in the previous, as production from the Andy Well mine, in the Murchison region of Western Australia, increased by 20% over the same period, to 47 197 oz. Revenue for the interim period also increased by 22%, from the A$60.1-million reported in the six months to December 2014, to A$73.1-million. Doray

MD Allan Kelly said that improvements in mining methods and dilution control at the Andy Well mine resulted in significant increases in gross profits and cash flow from operations, compared with the previous year. “We have had a very good half-year, and it sets us up as we move into commissioning at Deflector and increase production,” Kelly said in a conference call.

“The first half results see us on track to meet the upper-end of our production guidance of 78 000 oz to 85 000 oz, and if we achieve that, it would be the third consecutive year that we have outperformed the bankable feasibility forecast at Andy Well of 74 000 oz/y, while the significant increase in earnings and profit sees us outperforming some of our larger peers in the sector on a per-capital basis.”

Kelly meanwhile said that construction of the Deflector project, also in Western Australia, was progressing to schedule. Deflector, which was due to start production in mid-2016, was expected to produce 1 972 oz of gold from its openpit operation and 348 592 oz of gold from its underground mine. The mine would boost Doray’s production to some 140 000 oz/y.

China should set up gold logistics centre in the east

China should set up gold logistics centre in the east

Thanks the massive inflow of gold from foreign countries and regions in recent years, China's gold processing industry has been ranked first in the world. According to a recently issued blue book, China should now follow the trend and set up a gold logistics center, China News Service reports.

In 2014, China processed 886.09 tons of gold, leading the world and accounting for 30 percent of the world's total, despite a 24.68 percent decline from the previous year. This information comes from the blue book, which was published by the Ping An Bank funds operations center.

In recent years, a large amount of gold from Switzerland, the United Kingdom, North America, South Africa, plus other Asian countries and regions has been flown into China. Although Europe is still the biggest gold trading center, accounting for 80 percent of the global share, the distribution of China's gold has already shown a significant "west to east" trend, according to the blue book.

In 2014, the supply of gold in the Chinese gold market amounted to 2,106 tons. Although that number is lower than that of Switzerland, the world leader in gold transactions at 2,208.1 tons, China's gold exports only accounted for 13.17 percent of its supply this year, which means more than 80 percent of the gold has not been traded ¡ª 3.94 times that of Switzerland. So it is realistic for China to become a new gold logistics center.

In addition, the blue book pointed out China's other advantages, such as strong demand and a convenient, nearly completed logistics system.

Attached Files

Gold output slump triggers Kyrgyz GDP and exports fall

Kyrgyzstan's gross domestic product fell 7.8 percent year-on-year in January and February as gold and silver production, which accounts for most of its industrial output, dropped 56.5 percent, the state statistics committee said on Friday.

By contrast, in the first two months of 2015, the Central Asian country's GDP rose 8.9 percent.

Kyrgyz exports tumbled 39.9 percent in January 2016 as shipments of gold fell by more than three-quarters year-on-year.

Kumtor Gold Company, which operates Kyrgyzstan's biggest gold mine, said in January it planned to produce between 14.9 and 16.5 tonnes of gold in 2016, versus 16.2 tonnes last year.

But this will be weighted to the second half of the year, because of the geological structure of the deposit, it said.

Attached Files

Base Metals

Antofagasta Scraps Dividend as Metal Rout Erases Most Profit

Antofagasta Plc, the copper miner controlled by Chile’s richest family, scrapped its dividend after the rout in metals wiped out almost all of its annual profit.

Net income excluding some items fell to $5.5 million from $422.4 million for the year ended Dec. 31 from a year earlier, the company said in a statement. Sales dropped 34 percent to $3.4 billion. It decided not to pay a final dividend after its interim payment exceeded its policy of paying 35 percent of earnings.

“We know that copper is a cyclical industry and as a result of the actions that we have taken over the past year we will be positioned to benefit from the recovery when it comes," Chief Executive Officer Diego Hernandez said in the statement.

Antofagasta was among the worst-performing stocks last year in the U.K.’s FTSE 100 Index, tumbling 38 percent as falling metal prices hit profits, forcing miners around the world to cut jobs, dividends and investments to save money. Copper slumped 25 percent in 2015, the biggest annual drop since 2008, as demand from top consumer China slowed.

"Our focus is on optimizing our operations and projects under construction to cut costs and free up cash flow whilst retaining the flexibility to accelerate investment for future growth if circumstances are appropriate,” Hernandez said.

The miner affirmed its production forecast for this year of 710,000 to 740,000 metric tons of copper as output from its Antucoya mine increases and as it incorporates production from the Zaldivar operation, in which it bought a 50 percent stake last year.

Sellers' offers were stable at mostly Yuan 1,950/mt cash in both provinces.

Down south in Guangxi, refiners' quotes also continued at Yuan 1,850/mt cash, with tradeable prices pegged around Yuan 1,800/mt.

Galuminium Group, which operates an 800,000 mt/year smelter grade alumina refinery in Guangdong province, completely shut down in December 2015 due to poor market conditions to conduct an overhaul.

It now plans to restart 400,000 mt/year capacity in April, a company source said.

"The news of the restart has put a halt on spot alumina offers rising further, but there is no sign of prices going down yet," a South China smelter source said. "We'll have to wait and see how that impacts the market in the near term."

A Beijing trader said Galuminium's restart impact would be "minimal, as the quantity is small...the majority of the refinery shutdowns earlier were all in the north, in millions of mt, and there's no news of any restarts there yet, so prices can still edge higher."

A Shanxi refiner said Thursday he was currently sold out of March spot alumina, and would only offer spot for April delivery at the end of the month. He expects offers can likely reach Yuan 2,000-2,100/mt by then.

Attached Files

Peru's Fujimori would not back mines without community support: adviser

Peru's presidential frontrunner Keiko Fujimori would work to push out new mines faster if elected, but only for companies that have community backing, her economic adviser said on Friday.

Jose Chlimper, who is also the center-right politician's running mate, said Newmont Mining Corp (NEM.N) and Southern Copper Corp (SCCO.N) did not do enough to build local support for their proposed mines Conga and Tia Maria.

The companies, which suspended the projects because of local protests, had revised their plans to ease worries about environmental impacts and are investing in social programs.

"They have to look at their community relations plans and win back the legitimacy that they lack today," Chlimper said in an interview with Reuters.

"We're going to support the effort of serious companies to make big projects viable, but the ones that have not acted properly will not have our support," he said.

Peru's next president will likely inherit an economic recovery driven by surging copper output from new mines, but no major projects are set to come on line in coming years.

Chlimper said center-right Fujimori would create a legal framework to help miners turn local communities into shareholders in their projects - a tool to build support for new mines that some companies in Peru have already implemented.

Fujimori, the daughter of imprisoned ex-president Alberto Fujimori, has railed against President Ollanta Humala for fanning anti-mining sentiment as a candidate. Humala narrowly defeated her in her first presidential bid in 2011.

This year's race has been shaken by the electoral board's disqualification of two leading candidates a month before the April 10 vote. Fujimori's closest rival, Julio Guzman, was barred because his party did not comply with electoral procedures - a decision he calls "fraud" that threatens to tarnish the legitimacy of the next president.

Peru is set to become the world's second biggest copper supplier, but concerns about the impacts of mining near farming communities threaten to hurt new investments. Fujimori has pledged stiff fines for miners that pollute as she seeks votes on a populist platform in Andean regions.

Chlimper said Fujimori would study whether the corporate tax rate that Humala lowered as growth slowed had helped draw investments. The rate will gradually slide to 26 percent in 2019 from 30 percent in 2014.

Chilean labour bill clears Senate, but rebels knock down key part

Chile's Senate passed most parts of a controversial labor reform bill on Thursday night, but struck down one key provision in a sign of hardening divisions within the ruling coalition.

President Michelle Bachelet has pledged to reform labor relations and give unions more of a say as part of her agenda to tackle deep inequality in Chile, the top copper exporter.

But the reform has put considerable strain on her governing Nueva Mayoria bloc, which takes in communists to centrist Christian Democrats. Many senators in the latter have joined business leaders and the right-wing opposition in fighting against some aspects of the bill.

Of the three most disputed parts of the reforms, two provisions were passed by the Senate after being watered down by Christian Democrats and other centrists. One will allow unions rather than companies to distribute benefits resulting from collective bargaining agreements, and the other will restrict the replacement of striking workers.

A third provision, which would have required employers to negotiate with workers that unite across companies, was struck down as four Christian Democratic senators rebelled.

Though the bill was modified, its passage in the Senate, where it had been stuck since October amid fractious negotiations, is a significant step forward.

It is now expected to face a constitutional challenge by the opposition and will likely need to be reconciled with a version of the bill that passed the lower house. Both processes could be messy and will take weeks, if not months, analysts said.

Conservative members of the increasingly fractured Christian Democrats have said they want to use the opportunity to make provisions more employer-friendly, while left-wingers have pledged to try to reinstall more worker-friendly provisions that were scrapped in Senate negotiations.

"From what I've seen of the government's modifications, I don't think the lower house will accept the changes," said Josue Vega, a lawyer for Chile's largest labor union.

Excessive delays, analysts have warned, could cause the already-unpopular Bachelet to lose bargaining power at a time when she is trying to push through other reforms, including an overhaul of the constitution and a rewrite of its strict abortion laws.

"The worse thing that could happen for Bachelet is losing the support of the parties," said political analyst Kenneth Bunker.

"That brings about a scenario where she lacks the legitimacy to pass other programs."

Steel, Iron Ore and Coal

Russia's Evraz 2015 core earnings down 39 pct

Evraz, one of Russia's largest steel producers, said on Tuesday its core earnings fell 39 percent in 2015 due to lower prices for its products, partially offset by a weaker rouble.

Evraz and other Russian steel producers have been supported by the weaker rouble reducing costs in dollar terms and making exports more profitable, but were hit by a drop in global steel prices which fell by a third last year.

Evraz's earnings before interest, taxation, depreciation and amortisation (EBITDA) fell to $1.4 billion in 2015 compared with $2.4 billion in 2014, in line with the median forecast in a Reuters poll of analysts.

The company, part-owned by Chelsea soccer club owner Roman Abramovich, also posted a net loss of $719 million due to $441 million of impairment charges and $367 million of foreign exchange losses. In 2014, its net loss was at $1.3 billion.

Evraz said its impairments included the write-off of goodwill at its subsidiaries in the United States and Canada and the impairment of the cash-generating units of Palini e Bertoli in Italy.

The company's revenue was down 33 percent to $8.8 billion, while net debt was reduced to $5.3 billion by the end of 2015 from $5.8 billion at the end of 2014.

Evraz said on a conference call its capital expenditure in 2016 would be less than $400 million, down from $428 million in 2015.

China company develops clean coal tech to lower emissions

Shenwu Environmental Technology Co., Ltd, a Shenzhen Stock Exchange-listed company based in Beijing, has released a new technique in coal processing that the company said will significantly lower the costs and emissions compared with conventional coal gasification.

The new technology separates the volatile matter from the fixed carbon content in coal. The volatile matter will be further decomposed into natural gases, petrol and synthesis gas.

The fixed carbon content will be transformed into calcium carbide and carbonic oxide. The calcium carbide will then react with water to produce acetylene.

China is in bad need of clean-coal technologies to ease its environmental pressure and production overcapacity, according to Wu Daohong, board chairman of Shenwu, the energy solutions company.

"In 2014, energy consumption per capita in China was 3.1 tonnes of standard coal, lower than half of the level in developed economies. Higher living standards come with higher per capita energy use. A moderately well-off society, which is China's goal by 2020, is normally marked by more than 4 tonnes of standard coal of per capita energy consumption," said Wu.

In the past 10 years, China has invested 1.56 trillion yuan ($240 billion) in developing clean coal. In the next five years, it is expected to invest another 3 trillion yuan in environmentally friendly coal.

According to statistics provided by Shenwu, the new technology is able to produce three products within one step－synthesis gas, petrol and natural gases－accounting for 24%, 38% and 38%, respectively, of the total final product. The conventional coal gasification, however, only produces synthesis gas. It needs further chemical reaction to produce petrol and natural gases.

With every 1 million tonnes of olefin, coal gasification requires investment of 28 billion yuan while the new technology only needs 20 billion yuan. The new technology's water consumption is also 50% lower than coal gasification. Its carbon dioxide emissions are 37% lower.

China's coal industry has been plagued by large investment, low outcome and high water consumption, said analysts.

Hebei to cap iron and steel capacity at 200 Mtpa by 2020

Northern China’s Hebei province, the largest steel production base in the country, aims to limit iron and steel production capacity within 200 million tonnes per annum (Mtpa) by 2020, the last year of the 13th Five-Year Plan period.

It means that 60% of the province’s existing iron and steel companies will be shut down or reorganized during the next five years, Governor Zhang Qingwei told a group discussion during the National People's Congress.

In 2016, the province targets to cut iron capacity by 10 Mtpa and steel capacity by 8 Mtpa, Zhang said.

During the process of reducing overcapacity, the problem of staff resettlement will be a headwind, insiders said.

A total 0.5 million iron and steel workers, mainly from private companies, will face risks of job adjustment or loss, as the country works to reduce 100-150 Mpta iron and steel capacity from 2016 to 2020, according to the China Iron and Steel Association.

The Hebei provincial government has unveiled some measures to address overcapacity, but the effect so far has not been so pleasing.

Last year, the Hebei government used the unemployment insurance fund to subsidize iron and steel companies meeting requirements in job transfer training, occupation and social insurance assistance.

But it mainly favors large state-owned iron and steel companies, while small private ones still have to paddle their own canoes to resettle or lay off staff.

Another problem to obstruct overcapacity reduction is that iron and steel companies, which have suspended production either under the government’s order or spontaneously on huge deficit, may restart capacity as the market improves.

In the wake of price rebound, major steel mills expanded capacity utilization rate to 77.49%, up from 74.69% at the start of this month.

Attached Files

China coal mining strikes grow

In what is being seen as a direct challenge to Beijing's authority, thousands of Chinese coalminers have taken to the streets to protest over unpaid wages, Reuters reports.

Employees at the Shuangyashan mine, owned by the Longmay Group, have been protesting for 3-days over owed pay and wages cuts from 1,000 yuan-a-month to 800 yuan.

The Chinese govt has said it will set aside $US15.4B to “resettle” coal and steel workers as part of a plan to cut unproductive capacity. For the first 2-months of 2016, Chinese production of thermal coal and steel both fell 16 %, while coking coal output dropped 10%.

Changes in coking coal sector cast uncertainty over pricing

A revolution is threatening behind the scenes in coking coal, pointing to heightened uncertainty in one of the most conservative of markets.

The move towards spot pricing that has been embraced in iron ore, and increasingly dominates thermal coal trade, has been until now largely sidestepped in coking coal, where buyers demand at least medium-term visibility on prices for different grades of product that are closely matched with steel mills.

But that could be about to change, at least in a scenario put forward by industry consultancy IHS.Anglo American's surprise decision in February to exit its high-quality Moranbah North and Grosvenor mines in Queensland, a deal regarded as fetching potentially $2 billion ($2.68 billion) or more, could hasten the end of the system, clients at an IHS seminar heard this week in Sydney.

The current system of setting a quarterly benchmark price for coking coal, which is then accepted across the industry, is led by Anglo, with its coal regarded as comparable with the top-tier brands of BHP Billiton, which doesn't engage in that process.

But with Anglo heading for the exit door and none of the large miners likely to be interested in those mines, the prospect arises of a buyer taking over – private equity, perhaps – that has no appetite to lead the critical pricing talks, IHS's senior coal analyst Marian Hookham says.

While others, such as Teck, have tried in the past, those attempts have failed because few parties would accept the deal as a benchmark. That leaves the potential for a vacuum that could lead to a collapse of the whole quarterly benchmark system, Hookham says.

China Jan-Feb coal industry FAI down 30.2pct on year

China’s fixed-asset investment (FAI) in coal mining and washing industry amounted to 10.2 billion yuan ($1.57 billion) over January-February, slumping 30.2% from the year prior, showed data from the National Bureau of Statistics (NBS) on March 12.

Private investment in the sector stood at 6.7 billion yuan, falling 20.7% year on year.

In the same period, fixed-asset investment in all mining industry in the country posted a yearly slump of 29.5% to 39 billion yuan; of this, private investment in mining industry stood at 24.9 billion yuan, dropping 13.2% from the previous year.

Meanwhile, the total fixed-asset investment in ferrous mining industry over January-February also witnessed a yearly slump of 32.6% to 4.2 billion yuan; while that in oil and natural gas industry plummeted 59.4% on year to 6.2 billion yuan, according to the NBS data.

The fixed-asset investment in non-ferrous mining industry stood at 6.5 billion yuan during the same period, dropping 14.1% from the year-ago level, data showed.

ArcelorMittal outlines terms of $3bn rights issue

ArcelorMittal on Friday outlined the terms of a $3bn rights issue designed to reduce its $16bn debt pile at a time of turbulence in the global steel industry.

Shareholders in the world’s largest steelmaker will be able to receive seven new shares for each 10 they own at €2.20 apiece. That represents a discount of about 40 per cent to the company’s undisturbed share price before the rights issue was announced last month.

On Friday morning, ArcelorMittal’s shares were up 4 per cent at €4.42 on the Euronext Amsterdam exchange.

Amid the commodities downturn, ArcelorMittal reported a $7.9bn net loss for 2015 last month after recording large writedowns booked on its iron ore mining and steelmaking businesses. The shares have lost half their value since the start of 2015.

A global glut made steel cheaper last year than at any other point in the past decade, weighing heavily on earnings at other big producers such as US Steel and Posco of South Korea. In the UK, this has precipitated an existential crisis in the industry that has claimed thousands of jobs and cast doubt over its future.

Lakshmi Mittal, chief executive of ArcelorMittal, recently told the Financial Times he believed market conditions would improve as China started to shut down steel factories as part of an initiative dealing with excess industrial capacity. Its steel mills are accused of dumping surplus output on to international markets at lowball prices.

Luxembourg-based ArcelorMittal will use the proceeds of its rights issue — along with €875m from a disposal — to reduce its net debt by 26 per cent to $11.7bn. Net debt stood at $15.7bn at the end of December.

After suspending its dividend last year, the company is embarking on a drive to increase core profits by $3bn a year by 2020. Some analysts question whether the plan will succeed, partly because, amid intense competition, they say planned cost savings could be passed on to customers in the form of lower steel prices.

The Mittal family, which is the biggest shareholder in ArcelorMittal with a 37 per cent stake, has signed up to its entitlement in the rights issue, worth about $1.1bn.

Attached Files

Brazil's Usiminas says shareholders willing to inject capital

Brazilian steelmaker Usinas Siderurgicas de Minas Gerais SA said on Friday that shareholder Nippon Steel & Sumitomo Metal Corp was ready to inject up to 1 billion reais ($274.58 million) as part of a proposed capital increase.

Usiminas' other controlling shareholder, Italy's Techint Group, has notified the companythat it would buy up to 500 million reais in shares for the capital increase. As conditions of the Techint proposal, Usiminas must strengthen its cash position with resources from a mining arm, and creditors must agree in restructuring its debt.

Usiminas said in a statement that it was still discussing a potential loan standstill agreement with banks.

Nippon Steel has been pressing hard to approve a capital increase for Usiminas, threatening to sue fellow shareholders if they block the motion, a source said last week.

Nippon Steel is hoping approval of the capital increase will convince Usiminas' main creditors to refinance the debt and grant a short-term grace period, helping the company to avoid filing for bankruptcy protection.

Nippon and Techint have been at odds over management of Usiminas for more than a year. A board meeting in February ended with no agreement on the capital increase.

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